Martin Nicholas John Trott v. Deutsche Bank, AG

Background

Martin Nicholas John Trott and Christopher James Smith brought the action solely in their capacity as the foreign representatives and joint official liquidators of Madison Asset LLC. Madison was the subject of a Chapter 15 bankruptcy proceeding in the Southern District of New York, in which the bankruptcy court had recognized Madison’s foreign liquidation proceeding as a foreign main proceeding.

On May 20, 2022, Deutsche Bank AG filed an answer, defenses, and a counterclaim for indemnity to the plaintiffs’ second amended complaint. The plaintiffs’ deadline to answer the counterclaim was June 10, 2022.

The parties’ positions

The plaintiffs argued that Deutsche Bank’s counterclaim against Madison violated the automatic stay that followed recognition of Madison’s foreign proceeding. They contended that the counterclaim was therefore void and without effect or had to be withdrawn.

Deutsche Bank told the plaintiffs that it disagreed. It intended to ask the bankruptcy court for a declaration that the counterclaim did not violate the automatic stay or, alternatively, for an order lifting the stay so Deutsche Bank could assert the counterclaim against Madison. Pending that request, Deutsche Bank agreed that the plaintiffs did not need to answer the counterclaim.

Ruling

Judge Mary Kay Vyskocil ordered that, because of the automatic stay, the plaintiffs need not answer or otherwise respond to Deutsche Bank’s counterclaim while the anticipated bankruptcy-court motion was being resolved. The parties were ordered to promptly notify the district court of any bankruptcy-court order concerning that motion.

The order addressed only the plaintiffs’ obligation to respond to the counterclaim. The opinion does not state that the district court decided whether the counterclaim actually violated the automatic stay or whether Deutsche Bank was entitled to indemnity.